What caused stocks to correct.pdf

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1、RichardKooEQUITYRESEARCHJune4,2013Whatcausedstockstocorrect?Stockmarketsaroundtheworldhaveundergoneacorrectionoverthepasttwoweeks,butJapaneseequitiesexperiencedbyfarthesharpesthit.TheyenalsostrengthenedRichardKooischiefeconomistatNomuraResearchInstitute.Thisishistosomeextent

2、againstothercurrencies,signalingapossibleendtothetrendofaweakpersonalview.yenandarisingstockmarket.ReasonscitedfortheequityselloffincludeFedChairmanBenBernanke’sremarksaboutendingquantitativeeasingandaweakerthanexpected(preliminary)ChinesePMIreadingRichardKoor-koo@nri.co.jpf

3、romHSBCon23May.However,Ithinkamorefundamentalfactorwasalsoinvolved:stockshadrisenfarabovetheleveljustifiedbyimprovementsintherealeconomy.Theyen’sdeclineandthestockmarketgainsthatfollowedtheannouncementofAbenomicsattheendoflastyearclearlyoutpacedtheeconomicrecovery.Toreceivet

4、hispublication,pleaseTheprevailingviewisthatwearefinallyseeingareactiontothisexcessivelyrapidmove,contactyourlocalNomuraandifsothisisahealthycorrection.Thereality,however,maybesomewhatmorerepresentative.complicated.Divergenceininvestorbehaviorfueledvirtuouscycleofloweryenand

5、higherstocksMorespecifically,thesharpriseinequitiesthatlastedfromlatein2012untilafewweeksagoandtheseveralvirtuouscyclesthatfueledthistrendwerethemselvesmadepossiblebyaspecialsetofcircumstances.WhereasoverseasinvestorsrespondedtoAbenomicsbysellingtheyenandbuyingJapanesestocks

6、,Japaneseinstitutionalinvestorsinitiallyrefusedtojoinin,choosinginsteadtostayinthebondmarket.Becauseofthatdecision,long-terminterestratesdidnotrise.ThatreassuredinvestorsinsideandoutsideJapanwhoweresellingtheyenandbuyingJapaneseequities,givingaddedimpetustothetrend.Japanesei

7、nstitutionalinvestorsunderstandprivatedemandforfundsisnegligibleThenextquestioniswhydomesticandoverseasinvestorsrespondedsodifferentlytoAbenomics.Oneansweristhatmanydomesticinstitutionalinvestorsunderstoodthatprivate-sectorborrowinginJapanisnegligibleinspiteofzerointerestrat

8、esandthattherewasnoreasonwhymonetaryaccommodation—includingtheBOJ’squantita